Silicon Valley is spilling into Reno, bringing with it more business travelers and new residents as well as more infrastructure development that’s also attracting more travelers. The combined growth translates to a temperate pace of new hotel development
REPORT FROM THE U.S.—Reno is undergoing a resurgence that’s transforming the northern Nevada City from what was once primarily a gaming destination into the Silicon Desert.
Tesla, Apple and telecommunications company Switch are all investing money into constructing or expanding facilities in the area, bringing with them new jobs, the need for new residential development, cause for a $26-million infrastructure improvement program at the Reno-Tahoe International Airport and a spate of new hotels that includes the destination’s first globally branded full-service hotel, the non-gaming Renaissance Reno Downtown.
“New companies coming to the area have provided the destination with a healthy base of inbound business travelers who are often here for more than just a night or two,” said Phil DeLone, CEO of the Reno-Sparks Conventions & Visitors Authority. “The growth of these corporations here has really raised all boats on the tide; with all of the new residents that we now have, there’s also been a resurgence of restaurants, bars, nightclubs and other venues in the downtown river corridor.”
The destination has also benefited from steady growth in visitor numbers, from 4.6 million in 2014 to nearly 4.9 million in 2016, according to the RSCVA.
Room inventory has seen incremental growth. According to the RSCVA, which serves not only as a destination marketing entity but also a tax collection and distribution body, 236 keys added at the end of fiscal year 2014/2015 for a total of 15,391 rooms before growing again to 15,627 the following year and then again to 15,762 by the end of the 2016/2017 fiscal calendar (ending 30 June 2017).
The destination’s hotel occupancy also has shown measured increases over the same timeframe. RSCVA reported occupancy rates stood at 63.4% by fiscal year-end June 2014, increasing to 64.5% at the end of the following fiscal year before growing to 66.8% for the fiscal year ending June 2016, the most recent on record. Revenue per available room also increased between fiscal years 2014/2015 and 2015/2016, growing from $48.57 to $51.23, then to $54.71 percent following in fiscal year 2016/2017.
“With all of the new business that’s coming to Reno, it’s really caused in uptick in demand for rooms, and it’s also raised the bar on ADR,” said Rick Murdock, VP of sales and marketing at Eldorado Resorts, which owns and operates Reno’s Eldorado Resort Casino, Silver Legacy Resort Casino and Circus Circus Reno.
The influx of new company outposts in Reno is also shifting the business mix for Eldorado Resorts’ Reno properties, from roughly 70 percent leisure and 30 percent business travelers to an even 50-50 split. The uptick in business travelers, according to Murdock, helped prompt the company to invest $50 million across its three Reno properties.
“We have guests staying up to 14 days in this market,” he said.
But guests staying for longer periods of time are not exclusive to Eldorado Resorts’ guests. Homewood Suites by Hilton Reno has also proved an obvious choice for businesses new to the area that are in need of extended stay accommodations for their employees and contractors. The hotel’s GM Steve Johnston noted that the property has partnered with new players coming to town, increasing both short-term transient and long-duration stays while the companies’ new facilities are still under construction and they relocate staff.
“The growth in this market has allowed new properties to take their place without negatively affecting other hotels,” he said.
Fernando Leal, the developer behind Reno’s Renaissance Hotel and managing partner of HMRN LLC, has also received queries from these newcomers, looking to buy as much as 50 percent of room inventory for up to a year.
“We’ve been approached at least three or four times by companies that are household names, trying to find housing for employees, for months at a time –not weeks,” he said.
Leal’s next hotel project is a still-unnamed extended-stay property in the Tahoe Reno Industrial Center (TRI), home to the new Tesla Gigafactory and the data storage campuses of Google and Switch/Supernap.
Yet, the RSCVA is not relying solely on Reno’s newest captains of industry to build room nights; the convention and visitors authority released a five-year strategic plan in June 2016, outlining plans to grow the destination’s meetings business at a rate of 1.9% to achieve 20,000 room night bookings in fiscal year 2019-2020, to be consumed within two years.
Key aspects of the strategy include growing the RSCVA’s sales staff, expanding current marketing partnership with organizations such as Meeting Professionals International and a $1.5-million upgrade to the Reno-Sparks Convention Center. The program has already generated a major signing for the RSCVA; Interbike, the U.S.’ largest bicycle industry trade event, will host its annual tradeshow in Reno for five years, beginning in 2018.
But one of the challenges that the RSCVA faces in attracting more meetings groups is the lack of nationally branded hotels, which drive brand awareness and trust among meeting planners and their attendees who want to build their loyalty points. So it stands to reason that Leal believes flagged properties are the future of hotel development in the birthplace of Harrah’s Entertainment.
“I think it would be incredibly risky to open a hotel here that’s not branded,” he said.